Contribution
My Lords, I rise to offer my support to the amendments tabled by the noble Lord, Lord Wood, and by my noble friend Lord Moynihan. These amendments take quite different approaches, but they seem to be driving at the same thing: a desire to clarify and improve the financial licensing section of the Bill. In my view, they highlight a really important principle—that the IFR should adopt an outcomes-focused, light-touch approach to developing its regulatory framework, and that it should work closely with football to do that.
These amendments would, in my view, be a vital step towards achieving a good balance in football regulation, one that safeguards financial sustainability by targeting clubs that have problems, which are clearly critical, while also respecting the unique responsibilities and expertise of the competition organisers. The current drafting of the Bill leaves critical questions unanswered about the regulators’ approach to financial regulation.
It is currently unclear whether the IFR will take a blanket, rule-driven approach that imposes granular financial requirements such as specific liquidity ratios or debt-to-equity thresholds across all clubs or, alternatively, whether it will adopt an entirely bespoke approach, applying discretionary licence conditions to every single club—all 116 of them—according to their unique circumstances and business models. If the IFR did the latter—it is entirely open to the IFR, because that is how ambiguous the Bill is—it would significantly undermine competition organisers’ ability to maintain a level playing field. Those licence conditions would necessarily need to be confidential to protect commercially sensitive information. For example, my club, West Ham United, would have no idea whether other comparable clubs were operating under similar conditions or not. That is a recipe for competitive chaos.
These amendments would mean that the IFR would need to take a far more balanced path to an outcomes-based approach, setting high-level principles and objectives while allowing leagues to implement their own rules to achieve those outcomes. Of course, they would be able, and must be able, to take a targeted approach to clubs getting into difficulties, stepping in at any time if those rules were deemed systemically not to be working, or if there was urgent concern about a single club or group of clubs. A more outcomes-based approach would ensure that the IFR focuses on the “what” rather than the “how”. By defining clear financial outcomes such as on balance sheet health, resilience, transitionary finance and asset protection, the IFR could establish a framework that addresses financial risks while avoiding unnecessary micro-management of clubs.
There is no reason why financial licensing should not follow this proportionate, targeted model, particularly as competition organisers such as the Premier League and the EFL already have sophisticated financial sustainability rules in place. If another competition organiser, perhaps one that has had less success in enforcing financial rules, wishes to give up this area completely to the IFR, that would be its right, but let us not forget that competition organisers have a deep understanding of their clubs’ financial dynamics. They already operate robust systems to monitor and enforce financial sustainability; for example, the Premier League has detailed profitability and sustainability rules, which are strictly adhered to, while the EFL has its own financial monitoring requirements tailored to the unique challenges faced by its clubs.